SHENG SIONG GROUP LTD (SGX:OV8)
KOUFU GROUP LIMITED (SGX:VL6)
SINGAPORE TECH ENGINEERING LTD (SGX:S63)
MAPLETREE COMMERCIAL TRUST (SGX:N2IU)
CAPITALAND MALL TRUST (SGX:C38U)
Singapore Budget 2020 - Relief, Resilience, Recovery
- Generous budget to tackle short term challenges, laying the foundation for the future.
- A shot in the arm for hospitality, retail, transport and property sectors.
- Covid-19 outbreak to bottom, budget boost will cushion earnings impact.
- Beneficiaries: consumer companies Sheng Siong Group (SGX:OV8), Koufu Group (SGX:VL6) while ST Engineering (SGX:S63), Silverlake Axis (SGX:5CP) will benefit from the push for digitalisation.
- Prefer retail to hospitality REITS - Mapletree Commercial Trust (SGX:N2IU), CapitaLand Mall Trust (SGX:C38U).
- UOL Group (SGX:U14) and CapitaLand (SGX:C31) will see margin upside in the medium term.
Unprecedented budget tackling short term challenges...
- Budget 2020 focused on both a decisive short-term response to Covid-19 and the longer-term needs of the country. An overall budget deficit of S$10.9bn (2.1% of GDP) is expected for FY20, exceeding 2009’s S$8.7bn deficit during the GFC. This budget includes a huge S$4bn Stabilisation and Support package to stabilise the economy against Covid-19 by helping workers remain employed and aiding companies with cash flow.
…with eye on the future.
- The government also introduced packages to
- enable companies and people to transform and grow,
- provide help for households to alleviate the higher cost of living,
- increase social spending,
- buffer against GST hike and
- set aside funds to fight climate change, to build a sustainable Singapore for the future.
Lift for hospitality related sectors, consumer companies to benefit.
- Specifically, sectors in tourism, retail, property, aviation, point-to-point transport, which are hit by the Covid-19, will receive special aid in the form of tax rebates, loans, and fee waivers. Beneficiaries of the generous handouts to spur consumption of basic goods are Sheng Siong Group (SGX:OV8) and Koufu Group (SGX:VL6).
- ST Engineering (SGX:S63) and Silverlake Axis (SGX:5CP) could benefit from the government’s push for digitalisation and focus on security.
Maintaining STI 3,500 year-end target.
- The generous handouts to provide reliefs for both corporates and individuals will place the economy on a stronger footing to recover once this storm blows over.
- We are keeping our end-2020 STI target at 3,500 pegged at around 12.59x (-0.5SD) FY21F PE, on the premise of a V-shaped GDP recovery from 2Q.
Bottoming signals on Covid-19.
- The situation in China has been improving since 5 Feb, and this trend should continue. For Singapore, Dorscon Orange could start to reveal its effectiveness as soon as end-Feb. Chinese factories should return to normalcy in 2Q and could well make up for some of the lost time by ramping up production in 2H.
- We are looking at WHO to deliver the ‘magic pill’ in 2Q by lowering the risk assessment for China and the region. This should unleash pent-up travel demand and increase MICE activities in 2H. Adding the strong support from Budget 2020, the impact of Covid-19 on FY20 corporate earnings may not be as bad as feared.
- Click the 'view full report' button below for complete analysis.
Janice CHUA
DBS Group Research
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Kee Yan YEO CMT
DBS Research
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Andy SIM CFA
DBS Research
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https://www.dbsvickers.com/
2020-02-19
SGX Stock
Analyst Report
1.410
SAME
1.410
0.84
SAME
0.84
4.640
SAME
4.640
2.600
SAME
2.600
2.950
SAME
2.950
